Filing personal income taxes is a difficult endeavor for most taxpayers. As the complexity of the tax code has increased steadily in the past few decades, so too has the difficulty for individuals in maintaining compliance. This has contributed to the popularity of tax preparation software for electronic preparation and filing of personal income taxes.
Though many taxpayers file their income taxes under the advisement of tax preparation software and/or a tax professional (i.e., a certified public accountant), many are given little advisement in selecting allowances and/or making preparations for filing prior to the end of the tax year. This is complicated by the fact that some State and Federal governments charge penalties for underpayment of taxes if a taxpayer's annual withholding is less than their tax liability for the year. As a result, most taxpayers claim less allowances than they are entitled to and end up overpaying their taxes.
As tax refund checks have become ubiquitous in the world of personal finance, companies have capitalized on this by providing refund anticipation loans so that taxpayers can receive their tax refund immediately upon (or shortly after) filing. This and other practices reflect the ever-expanding complexity of the tax system and the growing demand for simple and economical alternatives to large tax withholdings/refunds and/or disciplined saving and investing.